Hitachi earnings show slow recovery continues

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Published: Feb 5, 2007 7:37 p.m. ET

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(This item first ran at 0936 GMT.)

TOKYO (MarketWatch) -- Hitachi Ltd. (6501.TO) said Monday its group net profit in the October-December period tumbled 77% on year due to a higher tax burden, but the company appears to be slowly regaining its financial health.

The Tokyo-based industrial electronics giant said it posted a group net profit of Y1.26 billion in the fiscal third quarter, compared with a year-earlier profit of Y5.49 billion.

But Hitachi also reported its group operating profit, which is calculated before tax considerations, shot up 57% to Y61.56 billion. The company said its bottom line was hurt by an increased tax burden that reflected improved earnings at several subsidiaries.

Hitachi, which didn't change its forecast for a Y55 billion group net loss this fiscal year through March, is in the middle of a recovery plan under President and Director Kazuo Furukawa, who took over the company's helm in April.

Furukawa has pledged to make the company's mainline flat-screen television, hard-disk drive and power systems businesses profitable by next fiscal year through March 2008.

The company said its power and industrial systems division had a strong quarter, especially overseas, with operating profit increasing by more than double to Y27.7 billion, from Y13.0 billion recorded a year earlier. Hitachi said in November it teamed up with General Electric Co. (GE) to pursue nuclear power contracts in the U.S. and other promising markets.

Its electronic device unit also had a strong quarter. These helped to offset heavy losses in the company's digital media and hard-disk drive businesses, which continued to suffer from price competition during the period.

Hitachi's digital media unit saw its operating loss almost quadruple to Y19.1 billion from Y5.8 billion a year earlier, which includes sales of thin-screen televisions, even as unit sales of such televisions increased 60%.

Its hard-disk operations racked up a Y14.4-billion loss - almost double that of a year earlier - even as sales increased over 20%.

At a press conference on its earnings, however, Hitachi expressed optimism that its television operations would return to profitability by the end of this fiscal year through March 31, and that its hard-disk business would return to the black by March 2008.

Hitachi said group sales totaled Y2.488 trillion in the quarter, a 10% rise from Y2.259 trillion posted a year earlier.

The company said its net profit for the period also fell on an annual basis because of a securities sales gain a year earlier.

For the current fiscal year, the company left unrevised its group operating profit outlook of Y180 billion - a 30% on-year decline - and kept its sales outlook at Y9.740 trillion, a slight increase.

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